WHY YOU MAY WANT TO CONSIDER A PRACTICE SALE IN 2019
- Potential change in capital gains tax. You may have read that Washington state is proposing adding a capital gains tax of 9%. California already has a capital gains tax of 13%. Other states are also considering either implement or increasing their capital gains tax rate. I don’t know if this is going to happen or not, I don’t have a crystal ball, but I suggest you talk to your advisers and get their thoughts on capital gains.
- Interest rates are starting to go up. The Federal Reserve just had an increase in interest rates a couple of months ago. The interest rates on practice loans typically lag home loan rates by six months or so. We have had a nice run of low-interest rates that have been below 5%. I expect they’ll be going up over 5% and probably end up between 5.25% and 5.75% on the high end.
- Corporate practices are becoming more active. There are more and more corporate and smaller groups buying practices at above-market multiples. We had several doctors who were not considering selling, but when we told them they get a million dollars or more from a corporate buyer than a single individual buyer, they decided the additional funds were worth it. They sold their practice and made a lot of money all while continuing to work in the practice. Last we checked they were ecstatic with their decision and enjoying being a veterinarian again.
- Management headaches – Let’s face it, managing a business isn’t what it used to be. New taxes such as the new employee leave tax in Washington are being thrust upon us. Finding good help has become tougher and tougher. A good economy hasn’t meant higher-paying jobs for entry-level staff at Fortune 100 companies. Figuring out how to compete against corporates and other veterinarians down the street has become a daunting task.
- Uncertainty. Uncertainty is a scary thing. The economy has been going well, but how long will it sustain itself. The stock market is up and down like a roller coaster lately. In addition, we don’t know what the insurance companies will do with reimbursements.
These are a few things to consider if you’re on the fence about selling your practice. We are always happy to sit down and buy you a cup of coffee/tea and discuss your individual situation. We’ll even give you an approximate value of your practice from both an individual buyer and a corporate buyer standpoint. Talking through different options always helps in making your decision. Best wishes for an extremely happy and healthy New Year!